Money used to be a taboo subject at the dinner table. These days, however, more and more parents recognize the need to educate their children on money matters at the earliest opportunity. This is especially true if you happen to be a migrant worker with kids back home.
Since kids don’t (and shouldn’t!) work for a living, their very first income generally comes in the form of an allowance. This is often given to children of school age for their meals, among other things.
Done right, allowances provide a great opportunity to teach kids how to handle their finances. How? Here are some guidelines:
- Go for a weekly allowance.
- Compute for the right figures.
- If you can, give your kid an allowance even if s/he still brings a packed lunch to school.
- Encourage your child to be an automatic saver.
- Let your kids pay for things they want via installments from their allowances.
As compared to a daily allowance, a weekly one forces the child to budget their money. Knowing that you won’t get your next allowance till the next week is also a strong deterrent against reckless, unnecessary spending.
However, if your kid is too young to understand the concept of a budget, you can start them off with a daily allowance. You can always upgrade them to a bi-weekly one, and then to a weekly one once they’re ready.
How do you make sure your kid’s allowance is enough? If you can, pay a visit to their school canteen and get the average price of the meals on offer. Compute accordingly, depending on whether your kid has a full day or half-day schedule.
You should also include a small cushion in your kid’s allowance, perhaps around 10% of your previous computation. This allows for any emergency expenses and/or money that your kid can put aside as savings.
If your household budget allows for it, you could still give your kid an allowance AND a packed lunch.
Why? It will help strengthen your kid’s ability to make important spending decisions and to take responsibility for his/her actions. Just make sure you tell your child what the money is for. Emphasize that it’s for emergency expenses (e.g., cab or jeepney fare for getting home if they get left behind by the school bus), and not for frivolous spending (i.e., they can’t blow it on candies or junk food).
Rather than telling your kids to save what is left of their allowance, encourage the reverse. Have them spend what is left.
For instance, if you give your kids Php100 each every Sunday night for Monday’s allowance, they should put aside Php20 of it before they even get to school the next day. Set up a piggy bank or, better yet, a savings account for each child so they have someplace safe to put their savings in.
Even if you can very much afford to indulge your child’s every whim, it’s still advisable to let them at least try to pay for their wants. (Needs, of course, should be the parent’s responsibility.)
Say, your kid wants a new phone. You can offer to buy them one outright, but have them pay for at least half of it using a portion of their allowance every week. Either that, or deduct a fixed amount from their weekly allowance before you give it to them.
This does two things. One is it teaches your child the value of money. Another is that it compels them to take better care of their possessions. You wouldn’t be so careless with something that took you weeks to pay off, right?
They say that good parents raise their kids to rely on themselves, rather than on their parents. Financial independence is certainly critical to that goal, and the sooner a child learns how to handle their money responsibly, the better it is for everyone involved.